(updated with correction)
Institutional investors were most likely to get best execution from their U.S. equity orders through Sanford C. Bernstein, Liquidnet, Lava Trading, Banc of America and BNY ConvergEx Group, according to Investment Technology Group Inc.'s 2008 Broker Edge Universe survey.
Four of those five — Bernstein, Lava, Banc of America and Liquidnet — also were able to add value to their trades despite turmoil in the capital markets that wreaked havoc on trading costs and commissions in 2008.
ITG's Broker Edge survey analyzes about 7 million trades worth $3.3 trillion, ranking firms by the categories of core brokers and specialty brokers. The survey defines core brokers as those who trade globally, provide research, offer soft-dollar and/or commission sharing arrangement services to clients, and provide trading services in multiple asset classes, including exchange-traded equity derivatives. Specialty brokers are defined as those used for a specific area of expertise.
Trades were further broken down by firms with conducting large trades of 50,000 or more shares, firms with conducting medium trades of 10,000 to 50,000 shares, and firms with small trades of 10,000 shares or less.
Trading costs for the U.S. combined universe increased 32 basis points, or 60%, on a year-over-year basis, and commission costs increased for two consecutive quarters, jumping from seven basis points in the second quarter to nine basis points in the fourth quarter.
Sanford C. Bernstein, New York, ranked No. 1 for large trades in the core broker category — returning four value-added basis points — and first in execution cost for large trades.
Thomas Wright, head of equity trading at Sanford C. Bernstein, said experienced value-added sector traders and a state-of-the-art electronic trading platform were key to the company's success.
“We continue to heavily invest across our trading platform on the "high-touch' side as well as on our electronic platform,” Mr. Wright said in an interview.
Banc of America, New York, was second for large trades in the core broker category with two value-added basis points. It also took the top spot for medium-sized trades in the core broker category — returning zero value-added basis points — and first in execution cost for medium-sized trades in the core broker category. Banc of America also was the leader in lowest small-trade commissions in the core broker category.
BNY ConvergEx Group, New York, tied Banc of America for first in small trades in the core broker category, with both firms returning -2 value-added basis points. The two firms also were among the top-ranked brokers for best small-trade execution cost in the core brokers category.